Scarce Housing Options Driving a New Building Boom

Home prices, number of sales, and rental occupancy rates and rents are up. And, according to numbers released yesterday, so is new construction. MetroStudy, a firm that tracks realty numbers, says construction in the third quarter is up 37% from last year.

But what does this mean for Austinites looking for roofs over their heads? Leonard Guerrero with the Austin Board of Realtors says there are more people looking for homes than there are homes to sell, which is a factor driving prices up.

“We’re operating on about a four month inventory,” Guerrero says. “Markets typically show a six-month inventory. ‘Six-month inventory’ just means that if houses stopped going on sale today, it would take about six months for all of them to be off the market.”

Guerrero looks to Austin’s flush job market as the culprit. The influx means more people need places to live, and Guerrero says many avenues for housing are nearly tapped out.

Eldon Rude is with MetroStudy. “We have an apartment market that is 95% occupied. Rent is going up briskly,” Rude says, “so people are beginning to look to alternatives for their housing besides increasing rent, so they’re moving to the new home market or the resale market.”

Rude says inventory of existing housing is so tight that it’s encouraging more homes to be built to meet demand. Guerrero says he sees the most construction in residential areas surrounding downtown Austin: Hutto, Taylor, Elgin, and Manor in the east, Kyle and Buda in the south, and Pflugerville and Round Rock in the north.

Rude says prices are likely to keep going up, and with mortgage rates still very low, that’s encouraging more people to buy homes for the first time.

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A steady stream of people moving to Central Texas has made finding an apartment more difficult. U.S. Census Bureau data released in June ranked Round Rock second and Austin third on a list of the fastest-growing large cities in the country.

Capitol Market Research, which studies the area’s rental market, says there are barely enough apartment units in the Austin-area to keep up with demand. It says the average rent on a two-bedroom, two-bath apartment is now about $1,100 a month.

Slowing construction and rising employment will push average Austin rent prices four percent higher this year, according to real estate analyst Marcus and Millichap.

In its 2011 annual apartment forecast, the firm says only 1,000 rental units will be constructed across the entire metro area this year, compared to 2,900 units in 2010. At the same time, the company predicts local employers will add 21,000 positions this year, up from the 14,400 jobs created last year.

“Definitely that is one of the drawbacks of federal funding is that it takes a long time to get down to the people and so the state didn’t have that available to them until just a few weeks ago to even put this application out. And so some people, when a year has passed, they’ve found other ways to recover on their own because they just can’t wait," says Katy Sellers, the land office's Liaison Manager for Disaster.